Are you looking for a new destination to expand your business? If so, you might want to consider Vietnam as an option. Vietnam is a dynamic and emerging market with endless potential and many advantages for foreign investors. The country has a large and young population, a fast-growing economy, and a stable political system. Vietnam also offers various incentives and benefits for foreign businesses, such as low labor costs, preferential tax rates, free trade agreements, and improved infrastructure. Hence, the investors are now growing interests in doing business in Vietnam.
Overview of the social situation that make doing business in Vietnam attractive
Geographical location
Vietnam is a Southeast Asian country, located on the Indochinese peninsula, looking over the sea with an area of 1 million square kilometers. This is an area with 5 regional maritime routes and local maritime routes which is also considered the second busiest international traffic route in the world, after the Mediterranean, with a dense density of ships.
In addition, with a coastline of 3,260 km, Vietnam is known as a crossroads of maritime traffic, having favorable advantages in trade and trade with other countries in Southeast Asia and Asia and in the world.
This is a natural condition, promoting Vietnam in the development of key economic sectors such as import and export of goods business, distribution, logistics services, tourism industries, etc.
Not only having a favorable geographical position that encourage the investors doing business in Vietnam, it has also taken advantage of this favorable position to build and develop transport infrastructure, seaports, roads, railways, and airports. Vietnam’s geographical advantage has become an advantage to attract many domestic and international investors to set up company, make invest and do business in Vietnam.
Political regime
Vietnam has gradually built a peaceful and stable country and has become a reliable destination for not only tourists and investors, but also chosen as a place to host international events such as APEC (2017), GM S6 Summit, WEF ASEAN (2018), US-North Korea Summit (2019).
In addition, in order to develop diplomacy, political stability and integration with the world community, Vietnam has actively participated in many international organizations such as: United Nations (1977) and became a non-permanent member of the United Nations Security Council for the 2008-2009 term, participating in other UN organizations such as: International Labor Organization (ILO), Economic Commission for Asia and the Far East (ECAFE), World Health Organization (WHO).
In addition to developing the country’s policy to be friends with all nations, Vietnam also implements economic development goals in parallel, to match the situation of social development. Vietnam has implemented many open-door and market-integration policies since 1986 in order to be able to exchange and develop the economy in line with the development of the world and has achieved many high results in trade and economic development, cultural and social development.
Overview of the economic situation that make doing business in Vietnam attractive
The situation of international integration
Since the decision to open the market, Vietnam has signed over 90 bilateral trade agreements making doing business in Vietnam becoming easier. There are nearly 60 Agreements on investment promotion and protection, 54 Agreements against double taxation and many bilateral cultural cooperation agreements with other countries and international organizations. Vietnam has become a member of many economic organizations in the region and in the world such as: ASEAN (1995), ASEM (1996), APEC (1998), WTO (2007).
Vietnam is still actively participating in the negotiation and signing of many trade cooperation agreements in the region and the world, in order to create opportunities for domestic and foreign investors to have a can easily access and make investment in Vietnam for doing business.
Thanks to the decision of the country’s leaders to open the market, up to now, nearly 116 countries and territories have invested in Vietnam such as: Korea, Japan, the United States, China, Hong Kong, Singapore, Malaysia, etc. Foreign investors have invested in 59 of 63 provinces and cities of Vietnam with many different industries with tens of thousands of large and small investment projects. More and more foreign investors are choosing Vietnam as the place to make their investments and set up factories, company and expand its business over the time.
Key industries in Vietnam
Vietnam was inherently an agricultural country. Since the decision to reform and implement “Industrialization and modernization of the country”, Vietnam has changed direction to become an industrialized country in order to develop the industrial and modern economy.
With the advantage of having a number of natural resources and minerals in the country’s territory such as crude oil, iron, coal, aluminum… Vietnam has developed the mining industry, heavy industries, metallurgy, mechanical engineering industry. Taking advantage of its available natural advantages, Vietnam has gradually diversified its industrial products for domestic consumption and export to many other major markets around the world.
Besides, with a system of rivers throughout the territory, Vietnam has developed a large hydropower and wind power industry across the country. Large hydroelectric plants such as Hoa Binh, Song Da, Tri An, etc. have not only met enough electricity for 63 provinces and cities across the country, but also aimed to export electricity to neighboring countries. Taking advantage of more than 3,000 km of coastline, with abundant sea breeze, Vietnam has developed wind power industry in some provinces and cities of the country. Further, other clean energy such as solar energy power have also been developed in Vietnam to bring in clean power.
In addition, with the advantage of being a country with a diversified agriculture, fertile soil, suitable for many types of food crops, Vietnam also has a thriving agricultural production industry such as food production, brewing, fertilizer, etc.
For industrial products, it is impossible not to mention the textile and garment industry in Vietnam, which are considered two long-standing and highly productive manufacturing industries, not only leading in terms of domestic product market share, but also for many years being the leading export industries. With an annual export value contributing 10-15% of GDP, the textile industry after 20 years of establishment and development has always been a leading industry in Vietnam. Many investors from Korea, China, Taiwan have garment factories set up in Vietnam and expanded over the years.
Main export industries of Vietnam
Vietnam is building a goal to become an exporting country. Vietnam’s export turnover has always grown steadily over the years and exported to many major markets in the world such as the EU, the United States, China, and ASEAN.
Thanks to the development of globalization, the signing of many bilateral and multilateral trade agreements with many countries and regions around the world, Vietnam’s export value is increasing and contributing greatly to GDP of the whole country.
From 2014 to now, Vietnam’s trade balance has gradually changed, from a deficit country to a surplus with export to nearly 80 countries around the world with some of the world’s leading export famous key products such as rice, coffee, pepper, cashew nut, fruit. In addition, products accounted for high export turnover are textiles, leather shoes, aquatic products.
In 2018, which is considered to be the most successful year for the export activities of Vietnam’s textile and garment industry, with a total export turnover of more than 36 billion USD, an increase of more than 16% compared to 2017.
In addition, with the policies to develop high-tech industries, and the development of software parks, many preferential investment policies are introduce up to give tax incentives, land usage price incentives to company to be set up in software, production of high tech products. This strategy not only helps Vietnam reduce the import demand, but also makes Vietnam become an exporter of software and high tech products, such as telephone products, computer components, products from electronic components to many markets around the world.
Thanks to policies to support the production of key export products, prioritizing the development of high-tech industry, the annual trade balance of goods reaches a trade surplus of nearly USD 10 billion, which are impressive numbers for the growing economy in Vietnam after more than 30 years of opening the market, industrialization and modernization of the country.
Potential risks of doing business in Vietnam?
Doing business in Vietnam, as in any countries over the world, also poses some challenges, such as restricted business activities for example there might be conditional areas that foreigner could invest to set up company in Vietnam? Further, there might be complex regulations, cultural differences, and environmental issues. Therefore, foreign investors should carefully research the market conditions, legal requirements, and potential risks before doing business in Vietnam.
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